As active managers, we believe in delivering true, targeted exposure to the burgeoning asset classes of the Modern Economy. An economy that bets big on robots and wind farms, meat made from plants and plant-fueled cars. One that ebbs and flows with political tides and international geopolitical tensions. One that influences, and is influenced, by behavioral change, demographic change, and climate change. A Modern Economy that has created a multitude of new opportunities for capital appreciation and growth while challenging the savvy investor to adopt different strategies to wade through the noise.
Some of this noise comes in the form of trending buzzwords and punchy headlines, what seems to us like the investment industryâ€™s version of â€œclickbaitâ€. Catchy terms that we think often contort the true investment philosophies of managers. To help guide investors away from what might be a tempting trap, weâ€™re breaking down four of the most common buzzwords in the industry today.
Back in 2017, Forbes called out the belabored use of the word â€œdisruptiveâ€, yet here we still are (1). In todayâ€™s bustling world of innovation, ranging from startups to traditional companies launching new products, services, or features, laying claim to the title Disruptor can be relatively easy. On the face of it, the word â€œdisruptionâ€ might merely signify change. If we swapped out disruption for â€œevolution,â€ â€œsolutions,â€ or â€œprogress,â€ would anyone really notice? From a practical perspective, true disruption really only occurs when our way of doing or being gets flipped on its head in a manner most of us never anticipated nor even thought possible.
First, we shouldnâ€™t confuse disruption with innovation (which weâ€™ll get to later). A disruptive company or product is probably innovative, but not every innovation is disruptive. Take Tesla, for example: true, there is nothing else like it in the market — it is innovative — but it does not disrupt the way we get from one place to another. It does not make us rethink our already car-dominant society. Netflix, on the other hand, has completely disrupted the entertainment industry. Only one Blockbuster store exists today, movie theaters are a dying breed, and even cable subscriptions are mostly obsolete. As a rule of thumb, true disruption supplants old ways of operating in the world, and we probably didnâ€™t see them coming.
Artificial Intelligence & Deep Learning
AI & Deep Learning attempts to mimic human intelligence in that it learns (as the name implies) and adapts as it is fed data. This mimicry is the key differentiating factor between AI & Deep Learning and â€œhigh-techâ€, and even robotics or your average Roomba vacuum for that matter. AI & Deep Learning is not automation, though it incorporates elements of automation in its programming. AI & Deep Learning is also not merely a sophisticated algorithm, though algorithms do sometimes appear to anticipate what youâ€™re thinking, much like a human might.
AI & Deep Learning is only as powerful as the data it is given, allowing it to perform tasks formerly thought to be relegated only to the human domain. True AI & Deep Learning involves problem-solving, planning, learning, adapting, and manipulating. In the TrueShares AI & Deep Learning Fund (LRNZ), we focus our efforts on investing in a concentrated portfolio of companies that we identify as significantly involved in the application of true Artificial Intelligence and Deep Learning to seek a competitive advantage in hyper-growth industries.
While many companies take ESG principles seriously, the lack of regulatory oversight combined with the rapid growth in demand for ESG investing inevitably leads to â€œgreenwashing.â€ Greenwashing happens when a portfolio is marketed using inflated claims of sustainability and social responsibility to curry favor from those who are passionate about ESG, including consumers, investors, and employees. The ESG trend has led to band-wagoning and over amplification of ESG principles in investment funds and company claims in order to reap the benefits of participation. Greenwashing has become rampant across all sectors.
We seek to stand out against â€œgreenwashedâ€ ESG products by working to correct several perceived problems prevalent in most ESG funds by embracing the active nature of ESG and working to dispel the notion that ESG characteristics and outperformance canâ€™t coexist. In the TrueShares ESG Active Opportunities Fund (ECOZ), we utilize a proprietary ESG evaluation process in conjunction with traditional fundamental equity analysis in an effort to provide an environmentally resilient portfolio with a drastically reduced carbon footprint, registering a carbon intensity that is less than 25% of that of SPY, which tracks a broad market index.
Innovation is crucial to the continuing success of any organization. It is the practical implementation of ideas that result in the production of new products or services. If a company isnâ€™t innovating, what is it doing? Our problem here lies with the overuse of a term that should be standard practice in any organization.
We think that truly innovative companies spend their time and energy innovating â€“ not promoting how innovative they are. Their products and services should speak for themselves. Peel back the veneer of advertising and focus on what exactly the company is doing to continue their success and offer the market something it hasnâ€™t seen before. What new products or services are they developing? Do they align with the forward movement of their industry? If theyâ€™re solving for a pain point in the market, thatâ€™s a solid indication of true innovation.
As you can see, being able to parse out the authenticity from trending marketing claims can be a nuanced, yet highly valuable endeavor. In breaking down these common industry buzzwords, we aim to help investors become smarter and more informed decision makers as they wade through the noise. It just might be time for the investment industry to evolve beyond buzzwords and start following business models again.